NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect

James J. Choi, David Laibson, Brigitte C. Madrian

NBER Working Paper No. 13656
Issued in November 2007
NBER Program(s):   AG   AP   PE

Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of their own contributions, but the firm chose the match allocation. These enrollees ignored the match allocation when choosing their own-contribution allocation. In the second regime, enrollees simultaneously selected both accounts’ allocations, leading them to mentally integrate the two. Own-contribution allocations before the rule change equal the combined own- and match-contribution allocations afterwards, whereas combined allocations differ sharply across regimes.

download in pdf format
   (136 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (136 K) or via email.

This paper was revised on September 16, 2009

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13656

Published: James J. Choi & David Laibson & Brigitte C. Madrian, 2009. "Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect," American Economic Review, American Economic Association, vol. 99(5), pages 2085-95, December. citation courtesy of

Users who downloaded this paper also downloaded these:
Barberis and Huang w8190 Mental Accounting, Loss Aversion, and Individual Stock Returns
Inman w14579 The Flypaper Effect
Hastings and Shapiro w18248 Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks
Beshears, Choi, Laibson, and Madrian The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States
Carroll, Choi, Laibson, Madrian, and Metrick w11074 Optimal Defaults and Active Decisions
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us